European server sales continue recovery

The region's server market is showing sustained growth, but high-end buyers are still holding out

Gartner's latest research into the European server market shows promising signs for the recovery of the sector, with IBM the biggest beneficiary of growth in Europe, the Middle East and Africa (EMEA), as elsewhere.

Server shipments to the region for the second quarter increased 21 percent sequentially to 373,000 units, continuing the positive momentum of recent quarters, according to Gartner figures published late last week. In the same period, server revenues grew 5 percent. IBM showed the biggest growth with a quarterly increase of 41.4 percent, taking 16.9 percent of the market.

EMEA market leader HP, boosted by its acquisition of Compaq last year, is still at the top with 39.2 percent of the market, but grew a relatively sluggish 20.9 percent. Sun Microsystems, which has been struggling against IBM in the worldwide market, saw its shipments fall 18.4 percent.

Selling servers has been a punishing business since 2000, when the market dried up after the Internet mania subsided and the recession hit.

The EMEA region has seen a recovery in recent quarters, with the fastest growth coming from the Middle East and Africa, but revenue growth has been driven by low-end purchasing, according to Gartner. "Spending remains weak at the high end, which highlights the caution still prevalent among users," said Karen Benson, Gartner research vice president, in a statement.

Macroeconomic factors have also played a large part in the market growth. "Pent-up demand for upgrades and replacements within the installed base, as well as the availability of new technologies were the main drivers, but the weakness of the dollar was a significant factor in boosting demand," Benson stated.

In the global server market, IBM extended its lead in the second quarter, stealing a sizable slice of the worldwide market away from Sun, according to figures from Gartner rival IDC. Sales of IBM servers increased 10.1 percent to $3.2bn (£2.03bn), giving Big Blue 30.4 percent of the $10.6bn market. Third-ranked Sun saw revenue fall 18.7 percent to $1.4bn.

The numbers indicate that IBM, which Sun had trounced in the late 1990s, is now well along its road to recovery.

Sun's second calendar quarter typically is strong because it's the final quarter of the company's fiscal year, but in 2003 Sun deliberately refrained from sales incentives that it feared could pull in sales from the next quarter; a problem that occurred in 2002.

CNET News.com's Stephen Shankland contributed to this report.

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